10 October 2015

Ship owners have moved towards second hand tonnage in a more notable way
during the summer months. According to figures compiled by shipbroker
Intermodal, sale and purchase activity during the first three quarters of 2015
and more specifically during the summer season has been rather remarkable. “421
vessels, totaling 30 million dwt, changed hands in the period between June and
August 2015, while in the same period last year, 304 vessels, totaling 17.8
million dwt, were sold. The increase is significant and we generally see a
pretty good momentum in the number of sales as well as an increase in sale
candidates at the moment”, Intermodal said.

According to Mr. John N. Cotzias, SnP Broker, “what is also quite notable
is that this year kicked off with heavy scrapping activity. As a matter of
fact, during the first half of 2015 strong demo sales seemed to be laying the
groundwork for a record year of scrapping, however signs of a slowdown during
Q3, have now considerably lowered expectation for the year’s final figure. 739
vessels of 31million dwt were scrapped during the period Jan-Sep 2015, while
594 of these ships were sold for demo during Jan-Jun 2015. This clearly shows
that activity has slowed down compared to the first half of the year”.

Cotzias added that “the heavy scrapping activity that was witnessed in
the first six months of 2015 was almost solely attributed to dry bulk vessels
that amidst exceptionally poor rates headed for scrap in high volumes. In the
first half of the year, 265 dry bulk vessels (above 20,000dwt) were scrapped,
while in the entire of 2014 we count 267 vessels (above 20,000dwt) sent for
demo. The case of 15-yr bulkers being sent for scrap was more than often during
both Q1 and Q2, while as rates started finding a more stable foot in the
beginning of the summer season, dry bulk owners of older tonnage quickly
distanced themselves from the demolition option”.

He went on to note that “on the other hand and with regards to the volume
of tankers that have been scrapped so far in 2015, we note that this is
minimal. 68 Tankers were scrapped during the first half of the year and only 10
during the third quarter. The booming daily rates in the sector this year, have
after a prolonged period of intense volatility and disappointing performance,
provided tanker owners with renewed hope, while lower demolition prices have
also deterred owners of tankers above their scrapping age, to hold back a
little while longer. Last year, a total of 669 tankers, totaling 9.9mil dwt
were sent for scrap, while this year, in the period Jan-Sep we count 314
tankers of around 2.57 million dwt”.

Cotzias said that “average demolition prices offered
today are around 300 – 320 $/ton, while last year they were ranging between
400-420usd/ton. In the case of a VLCC, of about 37,000 tons lightweight,
today’s demo prices translate to $3-4 million less per ship sold. Adding to
that the fact that VLCC rates have soared to above $ 100,000/day in the past
three weeks, there is absolutely no argument for scrapping at the moment. If
freight rates remain around or close to current levels, it will make good sense
for all of the 21 VLs built between 1995 and 1996, which have reached or are
about to reach their 20th year and 4th SS/DD, to get their 5 year extension.
Overall sentiment remains bullish for the sector, while with Saudi Crude
Production expected to stay at levels well above 10 million barrels/day, and
the winter season approaching, the arguments for firm demand and negligible
scrapping in the following months remain plenty”, he concluded.